Elective Share of Surviving Spouse

Question 1

What is the general idea of elective share?

Answer 1

Protects the surviving spouse against disinheritance by giving the surviving spouse a MINIMUM SHARE of the deceased spouse’s estate

Question 2

What is the basic computation of elective share?

Answer 2

Elective share is the GREATER of:

1. $50k, AND
2. 1/3 of the net augmented estate after payment of debts and before payment of taxes

Question 3

What is an augmented estate?

Answer 3

T’s estate includes testamentary substitutes in the calculation of its value to prevent T from using non-probate assets to reduce the size of his probate estate (and thus, the size of the elective share)

Question 4

What testamentary substitutes are included in an augmented estate?

(Hint: Testamentary Substitutes need a LEG UP)

Answer 4

(TS LEG UP)

1. Totten Trusts
2. Survivorship rights
3. Lifetime transfers with strings attached
4. Employee pensions, profit-sharing, and deferred compensation plans
5. Gifts made within __ of death
6. US Govt bonds
7. Powers of appointment

Question 5

What is a Totten Trust?

(One of the testamentary substitutes included in an augmented estate for purposes of calculating elective share of T’s estate for surviving spouse)

Answer 5

Bank accounts in the form of “Decendent, Trustee for Beneficiary,” and similar arrangements

Question 6

What are some examples of Survivorship rights? (4)

(One of the testamentary substitutes included in an augmented estate for purposes of calculating elective share of T’s estate for surviving spouse)

Answer 6

1. Joint tenancies
2. Tenancies by the entirety
3. Joint bank accounts
4. Survivorship bank accounts

Question 7

What are two examples of “Lifetime transfers with strings attached”?

(One of the testamentary substitutes included in an augmented estate for purposes of calculating elective share of T’s estate for surviving spouse)

Answer 7

1. Transfers where the decedent retained the power to revoke, dispose of principal, or name new beneficiaries; AND
2. Transfers made during marriage, even if irrevocable, if the decent retained a life estate. (N.B. Transfer MUST have been made after Sept. 1, 1992)

Question 8

What is the requirement for “Gifts made within one year of death”?

(One of the testamentary substitutes included in an augmented estate for purposes of calculating elective share of T’s estate for surviving spouse)

Answer 8

The gift must exceed the annual gift tax exclusion ($14k) to be part of the augmented estate.

(NOTE: Gifts made in fear of impending death (gifts “causa mortis”) are part of the augmented estate regardless of the amount!)

Question 9

What is property NOT included in an augmented estate?

(Hint: LOGPIT)

Answer 9

1. Life insurance
2. One-half of a qualified pension or profit-sharing plan
3. Gifts less than $14k made within one year of death
4. Pre-marriage irrevocable transfers (e.g., gifts of property that decedent made before marriage)
5. Irrevocable transfers made more than one year before death
6. Irrevocable transfers made furing marriage where the decedent retained a life estate (IF made BEFORE Sept. 1, 1992)

Question 10

What is the general rule on determining the value of non-probate assets included in the augmented estate?

Answer 10

In general, the FULL VALUE of a non-probate asset is included in the augmented estate.

Question 11

What are the three special rules for survivorship property w/r/t calculating the value to be brought into the augmented estate?

Answer 11

1. IF survivorship assets between decedent and a third party created BEFORE the marriage: No more than 50% of the value is included
2. IF survivorship assets between decedent and a third party created DURING the marriage: The amount of the deceased spouse’s CONTRIBUTION is included (Surviving spouse has burden of proof)
3. IF survivorship assets between decedent and SURVIVING SPOUSE: 50% of the value is included

Question 12

If there is no estate administration, when must the surviving spouse elect for his/her elective share?

Answer 12

Within two years of decedent’s death

Question 13

If the estate is admitted to probate, when must the surviving spouse elect for his/her elective share?

Answer 13

Within six months of the Surrogate Court issuing letters testamentary or letters of administration

Question 14

What is the rule on spouse’s claim to exempt property?

Answer 14

In addition to the elective share, the surviving spouse is entitled to certain exempt personal property up to $92,500 (unlikely to actually walk away with that much - very rare that it works out).

Question 15

What is included in exempt personal property?

Answer 15

1. One car not to exceed $25k
2. Furniture, appliances, electronics, etc. not to exceed $20k
3. Cash allowances up to $25k
4. Animals, farm machinery, etc. not to exceed $20k
5. Books, DVDs, CDs, etc. up to $2,500

Question 16

What are the circumstances that preclude a surviving spouse from claiming an elective share and exempt property?

(DISMAL)

Answer 16

(DISMAL)

1. Divorce
2. Invalid divorce obtained by surviving spouse
3. Separation decree
4. Marriage is void
5. Abandonment or Lack of support

Question 17

What is the basic strategy for Wills questions?

Answer 17

1. Take care of the non-probate assets first! Remove them from the estate and distribute them to the appropriate people.
2. Determine if decedent died testate or intestate.
3. If intestate, determine the identity of D’s heirs.
4. If testate, determine the validity of the will.
5. Determine the proper distribution of property based on the facts of the case.
6. If there is a surviving spouse, determine whether he/she should file for an elective share.